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Why Augmented Reality is Making the Insurance Industry’s Head Spin

You see them on the street, in malls, in parks, in playgrounds, and sometimes—trampling on your front lawn.

They’re Pokémon GO players—people of all ages engaging in a fantastical scavenger hunt like the world has never seen. Armed with smartphones in hand and Google maps of their surroundings in lieu of treasure maps, they’re hunting after virtual creatures from Nintendo’s legendary Pokémon franchise that appear on their screens. The magnitude of the global phenomenon is staggering. Since launching on July 7, the game has been downloaded an estimated 100 million times in 72 countries and has generated $268 million in revenue.

The sheer popularity of Pokémon GO has also drawn a great deal of attention to the technology that underlies its appeal—Augmented Reality (AR). AR overlays virtual images onto what you’re looking at in real time. Though AR has been available on smartphone apps since at least 2009, it’s about to go mainstream in the gaming world.

AR games present both familiar risks and new ones to the public and game developers that have the insurance industry watching developments closely. Experts are wondering: Are we ready to meet the liability demands that are arising from this new technology?

Distracted Players

The first and most obvious risk is related to personal safety. In just the first few weeks after Pokémon GO’s release, a rash of accidents involving gamers filled the news. That shouldn’t be such a big surprise—just like texting behind the wheel or checking email while walking, staring at a screen while in motion is distracting at best and lethal at worst.

Most of those accidents were fairly benign—gamers who tripped or fell off a bike or skateboard while hunting characters, for example. Some were more unnerving, however, like the two Poké-players who tumbled over a cliff in Encinitas, CA. (They survived with minor injuries.) Another batch of gamers have put themselves and others at risk by trespassing on private property.

For what it’s worth, the game’s “Trainer Guidelines” specifically request that users do not trespass and “remember to be alert at all time [sic] and stay aware of your surroundings.” But do all of the gamers read and follow these guidelines? Users should also be aware that the game’s terms of service state that Niantic, Inc., the game’s developer, is not responsible for any property damage, injuries or deaths that result from playing.

Who Owns Your Data?

Meanwhile, gamers must also contend with another risk familiar to all of us in the digital age: the potential of identity theft. When signing up for the game, users are required to agree to the terms of service before they are allowed to play. Within those terms is a privacy policy that grants the developer the right to collect and share personal information with third parties.

Sharing personal data is the tradeoff many of us are willing to make when we covet a free digital tool. (And who among us hasn’t automatically clicked agree without actually reading a privacy policy?) But we also know that doing so exposes us to potential breaches from cyberattacks on third-party sites.

Gamers who get cold feet about potential data exposure can choose an opt-out provision—provided they remember to do it within the first 30 days of signing up by email. Yet even then, Niantic retains “perpetual” and “irrevocable” rights to share data, according to the terms of service.

Gamers Beware

Obviously, anyone who receives medical treatment as a result of an injury sustained while playing Pokémon GO will most likely submit a claim under his or her health insurance policy. (That is, unless other coverage is primary, such as no fault coverage under an auto policy or potentially Workers Compensation coverage.) Gamers who cause injury or damage to others while using the app should be covered for personal liability under their homeowners, renters, or auto insurance policy.

But the issue is not so straightforward if the injury happens at work. Although an activity like Pokémon GO would certainly not appear to be within the gamer’s “scope of employment,” what happens if the gamer is playing on the job and becomes distracted and is then injured? Will the employer’s Workers Compensation Policy provide coverage? What if a third party is injured by the employee/gamer who was distracted by the app while working? Would the employer’s liability policy provide coverage?

The issue is even murkier if there is a cyber breach, the user’s data is stolen, or the gamer’s personal information is used in a way that was not intended. While the option of adding identity theft coverage to a homeowner’s policy is available in most states, not everyone has this coverage. And even for those who do, it’s not clear whether the coverage is sufficient to cover the costs, expenses and damage that may result from the dissemination of the information.

Finally, there’s the question of whether Identity theft coverage would even apply in a situation where you voluntarily give the Company the right the share information with third parties.

Companies Beware

Even with a disclaimer about responsibility like Niantic’s, companies that develop, manufacture, market, sell and/or distribute AR apps should be prepared for potential liability issues with appropriate coverage. Among the issues is “trespass,” where the app leads a gamer to venture on to another’s property without permission; “attractive nuisance,” where the developer knows, or should know, that it is creating a condition on the property that would likely cause a child to trespass; and “cyber liability,” which covers damages that could occur as a result of the improper use of the personal data that the developer acquires.

Typically, companies will have a variety of liability coverages to meet these needs. But the cutting edge nature of AR apps suggests that companies must pay careful attention to the provisions, limitations and exclusions in their policies to understand, what is, and what is not, covered.

More Questions on the Horizon

The augmented reality market is expected to generate about $120 billion in revenue by 2020. (The figure includes other segments in addition to gaming.) That kind of dangling carrot, plus the ability to exploit a technology that is becoming more versatile and inexpensive, means we can expect more AR games rushing to market in the next few years. And with that will come more players on your lawn, stretching the bounds of gameplay and raising new questions for the consumer/gamers, the public and the insurance industry.

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